White foam drifting through canals, the putrid stench of chemicals and leather and smoke spewed by tanneries were all part of Amit Tripathi’s childhood in Kanpur. One of India’s most polluted metropolises, the largest city in Uttar Pradesh made Tripathi want to do something about the problem, but he did not know what. A sustainable management programme at the Indian Institute of Management in Lucknow was where the electrical engineer found an answer.
“Responsible managers can benefit their business, society and the environment all at the same time,” said Tripathi, who is currently working with the sustainability division of a leading consultancy firm.
The 32-year-old credited his business school years with helping him understand the relevance of sustainability to business practices.
“As environmental, social and governance issues become mainstream in managerial and [company] board decisions, also influencing profits, it is becoming all the more critical for a business school to train future leaders in this emerging domain,” said Kaushik Ranjan Bandyopadhyay, an associate professor who teaches business sustainability at IIM Lucknow.
Bandyopadhyay said the school’s programme trains future managers to face new sustainability challenges, such as water scarcity and increased operational and business-transition costs due to extreme weather events, and make businesses more resilient.
Ethical business education
More business schools across the country are embracing sustainability in teaching, research and practice. Management professors and environmentalists argue that burgeoning demand for ethical products and the need for new environmental disclosures require business managers and leaders to shift attention from their shareholders’ interests to those of the broader stakeholders.
Post India’s economic liberalisation programme embarked upon in the 1990s an MBA from India’s top business schools has been seen as a guarantee of a high paying corporate sector job. About 2,30,000 applicants take the entrance tests for the Indian Institutes of Management for less than 4,500 positions, testifying to their popularity.
Nor is the popularity restricted only to the country. In the Financial Times’ list of the top 100 business schools in the world, five are Indian. Cultural shifts at leading business schools, therefore, have a disproportionate impact.
As part of its sustainable management degree, IIM Lucknow has teamed up with villages where students learn about village life and the socio-economic and environmental challenges associated with rural economies. Students also visit factories abroad and study their sustainability practices.
The Birla Institute of Technology & Science in the city of Pilani has announced that its new business school in Mumbai will soon be carbon-neutral. IIM Kozhikode is planning a whole campus initiative around the environment and energy conservation and released a statement saying that a “scientific method of teaching and learning alone is not sufficient for preparing future managers. There is a need for an alternative form of management education”.
Other top business schools across the country, including XLRI Jamshedpur, Jamnalal Bajaj Institute of Management, Indian Institute of Foreign Trade Delhi and Goa Institute of Management, are focusing on social and ecological responsibilities in their management programmes.
Looking beyond profits
“There is a need for transformational business managers who can look beyond short-term profit margins and make the long-term sustainability of the world a key business priority,” said Gopal K Sarangi, an assistant professor at TERI School of Advanced Studies, who also teaches sustainable management and the circular economy.
It helps that these ideas have been forcefully stated by globally renowned management schools. According to the Yale School of Management in the US, “companies that see sustainability as a strategic imperative and opportunity will thrive in coming decades”.
Arun Lakhani, chair and managing director of Vishvaraj Environment, a Maharashtra-based company that works in water treatment, said that “there is an incremental change in the way people and stakeholders are looking at businesses and what they do”.
A lot of it is just about factoring in costs that have long been ignored. “Worldwide economic stress and damage from natural disasters in 2018 totalled $165 billion and 50% of that total was uninsured […] Over 200 of the world’s largest firms estimated that climate change would cost them a combined total of nearly $1 trillion in the case of non-action in the recent future,” the World Economic Forum said in 2020.
Tata L Raghu Ram, an associate professor at XLRI Jamshedpur, said that these are good steps, but more needs to be done. “There will be some who will be showing the path and there will be others who will be greenwashing,” he said. “Every step matters; at least we have started thinking about it.”
Industries and financial institutions increasingly value environmental, social and governance factors, and investors and regulators are looking at them closely. This is predominantly because commercial losses are increasingly attributed to non-financial factors.
“ESG performance has an indirect bearing on the credit ratings of a company,” said Raghu Ram of XLRI business school, which aims to make its campus carbon-neutral by 2024. “And firms need managers who can handle this aspect.”
Sarangi of TERI argued that consumers and investors alike are looking at sustainability report cards when deciding to invest in a company or purchase its products. “Companies need more business managers who possess the knowledge and expertise to understand environmental, social and corporate governance in the context of their operation and integrate the goals with their financial performance and broader company strategy,” Sarangi added.
“If you have to work and lead future businesses then you have to understand how environmental issues are going to impact them,” agreed Debashis Chatterjee, director at IIM Kozhikode.
Some are sceptical and believe the claims need to be taken with a pinch of salt. “Corporations exploiting natural resources for profit is nothing new and has been happening for decades,” said Shankar Prasad Pani, an environmentalist and a lawyer associated with National Green Tribunal, India’s environmental court. “These institutions have woken up late. There is also a question mark around how much of this teaching is actually translating from theory to practice. The same goes for companies as they have been flouting environmental norms for their short-term gains.”
He said companies need to come clean on their environmental impact and there should be a formal assessment of such actions.
The Securities and Exchange Board of India, the country’s main markets regulator, has proposed a new reporting framework called Business Responsibility and Sustainability Reporting for the top 1,000 listed companies. Once implemented, the annual Business Responsibility and Sustainability Reporting report will disclose these companies’ environmental activities and stakeholder relationships. SEBI also proposes in its draft policy that it may come up with sustainability indices.
“Growing environmental awareness has pressured companies to bend and look into the sustainability part as it works like a shock absorber for them,” Pani explained. As an example, he mentioned the mining sector. “When villagers protest companies build a park or start community projects to curb people’s outrage.”
Hiring management graduates with sustainability training, he conceded, may be mere tokenism, but at least it is a step in the right direction.
This article first appeared on The Third Pole.